A recent article named Jonathan Schwartz the worst CEO of all time.Well, it’s hard to tell whether it said that he was actually the worst, but the article is entitled Worst CEOs in American History and Schwartz was listed first.
There’s much to criticize about Schwartz’s tenure at Sun. While CEO, he did the following:
- Published a book of slogans entitled What We Must Do.
- Came up with eleven words — more slogans — to codify the company’s priorities.
- Changed the company’s stock symbol from SUNW to JAVA.
- Pushed a 1-for-4 inverse split of the stock. This caused the stock’s nominal price to jump from about $5 to $20, after which it steadily fell back to $5, erasing 75% of shareholder value.
In my opinion the worst move occurred in November 2008, when he announced a reorganization of the company — and yet more layoffs. That reorg simply shuffled things around into different groups, but it didn’t change anything fundamental.
You might also have noticed a similarity with the items listed above. They didn’t change anything fundamental either. So yeah, the company wasn’t doing very well and Schwartz failed to turn it around.
However, we need to put this into perspective. The articles states, “Schwartz’s promotion to CEO in April 2006 was followed by a long series of losses.” That’s true, but recall that Sun never really recovered from the dot-com bust. On an annualized basis, the company had lost money every year since 2002 so Schwartz’s tenure was also preceded by a long series of losses. Scott McNealy was president and CEO until 2006, so he deserves blame for Sun’s poor performance as well. Even after that McNealy wasn’t really out: he was still chairman. Do you think Schwartz’s hands were tied? Schwartz might have undertaken more radical changes, but for the fact that he was still running Scott’s company, with Scott looking over his shoulder.
And recall that McNealy picked Schwartz as COO, and eventually CEO, over some possibly better choices. (See here for instance, though Zander didn’t do very well at Motorola.) If Schwartz really was so bad, Scott deserves the blame for choosing him. (HT to Mark W for pointing this out.)
We should also look where Sun ended up. It was sold to Oracle for $7.4bn, over three times its value at its lowest point, which recovered at least some shareholder value. Thousands lost their jobs, but thousands more kept their jobs and made the transition to Oracle (including me). There is enough of a viable business left at Sun that Oracle thinks it can be grown back to profitability, not cut, scrapped, or shut down.
Schwartz’s tenure at Sun was far from successful, but it could have been much much worse. How much worse? Look at others on that list: Ken Lay, Bernie Ebbers. They defrauded investors of billions of dollars and robbed employees of their retirement savings. Also look at who’s missing from the list. Dennis Kozlowski (Tyco) was convicted of taking more than $80m in illegal bonuses. Q.T. Wiles (Miniscribe) was hired to turn the company around, but instead led a scheme to defraud investors that included shipping bricks instead of disk drives. These guys are criminals. Compared to them, Schwartz ain’t so bad. That’s not saying much, but hey, the article is supposed to be a list of the worst CEOs in history, right?
Schwartz deserves criticism, but he doesn’t deserve to be on this list.